Sunday, June 27, 2010

The "Fix"

clipped from

But the centerpiece of the bill is supposed to be a tighter regulation of banks. One of the major elements of the legislation was a proposal to force banks to divest themselves of risky trades, marking the return of the so-called “Volcker Rule”. But Joshua Brown writing in the Christian Science Monitor argues most of the restrictions were for show; that loopholes ensured it is Volcker only in name.

Wall Street wins this round. The “teeth” of the Volcker Rule have been kicked in and there are enough holes elsewhere for White & Case to exploit on behalf of their clientele til the cows come home. The Dems unanimously voted for it. Interestingly, Republicans all voted against it. They didn’t think the final version was strict enough or that it did enough to prevent Too Big To Fail. … There will be some limitation to what large banks can do on a proprietary basis, but they will still be de facto giant hedge funds, albeit hedge funds with higher capital reserve requirements.